The Morley high income property unit trust aims to produce a gross yield of 6 per cent a year by investing in a mix of property, property-related corporate bonds, UK gilts and cash.

Assessing the fund&#39s market suitability Stevens says: “It fits very well as clients and advisers are nervous about equities. Corporate bonds may now be oversold and deposits pay little interest. Hopefully, we are not at the top of the commercial property value cycle.” Franklin says: “There are several property funds available but investing 20 per cent in bonds is, I believe, unusual.”

Vaughan says: “This fund is one of relatively few products offering high income from a property fund. Although there have been similar products introduced in recent times.” Briggs says: “It offers a useful alternative to high income equity funds and corporate bond funds, especially at a time when the latter might be considered to have been oversold.”

Identifying potential clients for the fund Vaughan says: “Any client wanting to achieve an income stream greater than that available from deposit-based investments, and who is prepared to accept a degree of risk to capital and possible reduction of access to capital.” Franklin says: “It is really suited to clients who want to achieve a balanced asset mix.” Stevens says: “Well-heeled clients. Also, those willing to take a long-term view of at least 10 years.” Briggs suggests income seekers and taxpayers.

Considering the marketing opportunities the fund could provide, Briggs says he would be happy to promote this product to clients. Vaughan says: “Potential markets are retired clients looking for income, clients wary of investing in stockmarkets and those who have seen their income drop from other forms of investment.” However, Stevens feels there are no marketing opportunities.

The panel ponder on the main useful features and strong points of the product. Briggs points out that it invests mainly in real property. He adds that the company has a sound reputation, the fund has tax advantages and income is paid quarterly. Franklin says: “It is a direct property investment, it provides a good level of income, there is a good name behind it and investors have the ability to switch funds if required.”

Stevens says: “The maximum property content is 80 per cent of the fund value, leaving 20 per cent available for cash and bonds. This could provide an element of security, especially of rental income is reinvested into the cash and bond element of the fund.” Vaughan cites the quarterly income, the element of bonds and cash to ease cashflow and the target gross yield of 6 per cent.

Assessing the investment strategy, Briggs says it has a slightly novel mix of property and bonds. However, Franklin would prefer a pure property investment. Stevens says: “The fund favours retail and industrial property. I am unsure about the future of the industrial sector in the UK, given that there is no encouragement from the Government for industrials.” Vaughan says: “It has a simple investment strategy, which mixes retail and industrial property, supported by bonds and cash. It looks for investment opportunities providing above average income, with medium to longer-term leases. The strategy avoids the office sector.”

Moving to the negative aspects of the fund Stevens says: “The minimum investment is £10,000 and the minimum top-up is £5,000. This may be a bit high for investment into a new fund.” Briggs says: “Some may feel that commercial property is at, or close to, the top of the cycle. This is no good if monthly income is required.” Vaughan mentions the lack of an Isa link and supports Steven&#39s criticism of the minimum investment. Franklin also mentions the absence of an Isa option. He adds high charges and illiquidity to his list of criticisms.

The panel evaluate Morley&#39s reputation. Briggs thinks it is first class, while Vaughan says: “It appears to be quite strong and has the underpin of the Norwich Union Group. It has not been going long enough to get a poor reputation.” Franklin says: “It is excellent in some areas. Property gets the nod from me.” Stevens feels it is not well known in retail investment circles.

Discussing the company&#39s past performance Stevens says: “There is no track record for this fund, but the Norwich property unit trust has average performance in its sector.” Briggs says: “Again, first class. Witness the performance of the Norwich property unit trust.” Vaughan says: “Morley has only a few years&#39 trading on which to base its performance. Most of its funds appear below average, with the exception of its UK equity focus fund, which is first quartile. But it has only one year&#39s history.”

Highlighting possible competition Morley could face Vaughan says: “Any high income bond fund and income property funds from companies such as Standard Life.” Franklin suggests various property funds, especially Allied Dunbar. Stevens says: “Life assurance company property fund have performed well, especially when compared with equities. This includes excellent performance from Norwich Union, as well as Prudential, Scottish Widows, and Standard Life.” Briggs opts for high income corporate bond funds.

The panel discuss the charges and opinion is divided. Briggs and Vaughan think they are reasonable. Franklin feels the charges are too high and Stevens points out that perhaps property funds are expensive to manage.

The panel agree commission is fair but would like to see some renewal.

Casting an eye over the product literature Franklin says: “It is okay, but limited. It could do with a brochure and it needs more supporting information.” Vaughan says: “The key features are in plain English and simple to read and understand. They follow a step by step approach.” Briggs regards it as clear, concise, easy to read and easy to understand.” Stevens says: “It is very business-like and appropriate for the target market.”

Summing up Franklin says: “This seems to be a response to poor equity conditions. And yet, with Norwich Union&#39s reputation and skills in property, it should do well. I think this may turn out to be more than a fad product.” Vaughan says: “My concern is that the fund has bought at the top of the market and although income may be sustained, capital could be at risk in the shorter term.” Stevens concludes: “I hope it is not too late for property investment, but should we be looking at equities again?”

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